Essay on Merloni Case

976 Words Aug 13th, 2013 4 Pages
Case Analysis:
Merloni Elettrodomestici Spa

By

Sharath Chandra Rao Silvery PGP12094
Kumar Saurabh PGP12022
Vigneshwar PGP12104
Tejit Mithal PGP12046

A very brief insight into the Company: * Merloni Elettrodomestici SpA is an Italian company based in Fabriano and is one of Europe’s biggest makers of domestic appliances. * During the period from 1984 to 1986, Merloni undertook a number of initiatives to improve efficiency in inventory control and logistics. * One such initiative was the transit point experiment where in the Milano region, regional distribution centre was eliminated in favor of transit points which held zero inventory.

Question 1: What are the costs and benefits of Merloni's current distribution
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Advantages for Cross docking: * Cost saving in terms of infrastructure cost of regional warehouses and their maintenance. * Lesser amounts of overall inventory to be maintained * Lesser labor requirements due to closure of regional warehouses * Effect of bullwhip is lowered due to elimination of regional warehouses.
Disadvantages for Cross docking: * Because the regional warehouses will be eliminated, the capacity storage of the central warehouses should be expanded to meet the requirements of the extra Cycle inventory. * Intensive planning of daily shipment should be done (calculation of exact amount of goods to be shipped and arrangement of the goods) * Due to intensive planning, more skilled administration staff would be required. * If the customer does not order before 3pm, the delivery of the product would happen only after the second day. This can hamper customer satisfaction. * Since no inventory is maintained at near-by locations, the goods will have to be fetched from central warehouse thereby increasing lead time. * Demand variability is not easily supported by employing Transit Point methodology. If there is an urgent demand for goods in excess of truckload capacity then it can lead to huge additional cost. * If any of the vehicles break-down it could lead to huge delays and pile up of demand. Merloni needs to keep some extra vehicles as a backup, which needs to

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